Balance Sheet at 31 December 2010 of BBVA

Translation of financial statements originally issued in Spanish and prepared in accordance with generally accounting principles Spain
(See Note 1 and 54). In the event of a discrepancy, the Spanish-language version prevails.
regulatory and institutional framework, and payment capacity and record, the Bank classifies the transactions
into different groups, assigning to each group the provisions for insolvency percentages, which are derived
from those analyses.
However, due to the size of the Bank and to risk-country management, the provision levels are not significant
in relation to the insolvency provisions balance.
Impairment of other debt instruments
The impairment losses on debt securities included in the “Available-for-sale financial asset” portfolio are
equal to the positive difference between their acquisition cost (net of any principal repayment) after
deducting any impairment loss previously recognized in the income statement, and their fair value.
When there is objective evidence that the negative differences arising on valuation of these assets are due
to impairment, they are no longer considered as “Valuation Adjustments - Available-for-Sale Financial
Assets” and are recognized in the income statements. If all or part of the impairment losses are subsequently
recovered, the amount is recognized in the income statement for the year in which the recovery occurred.
Impairment of equity instruments
The amount of the impairment on the equity instruments is determined by the category in which they are
recognized:
Equity instruments measured at fair value: The criteria for quantifying and recognizing impairment
losses on equity instruments are similar to those for other debt instruments, with the exception of any
recovery of previously recognized impairment losses for an investment in an equity instrument
classified as available for sale, which are not recognized through profit or loss but recognized under
the heading “Valuation adjustments – Available-for-sale financial assets” in the balance sheet (Note
27).
Equity instruments measured at cost: The impairment losses on equity instruments measured at
acquisition cost are equal to the difference between their carrying amount and the present value of
expected future cash flows discounted at the market rate of return for similar securities. These
impairment losses are determined taking into account the equity of the investee (except for valuation
adjustments due to cash flow hedges) for the last approved balance sheet, adjusted for the
unrealized gains at the valuation date.
Impairment losses are recognized in the income statement for the period in which they arise as a
direct reduction of the cost of the instrument. These losses may only be reversed subsequently if the
assets are sold.
2.2. TRANSFERS AND DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES
The accounting treatment of transfers of financial assets depends on the extent to which the risks and
rewards associated with the transferred assets are transferred to third parties.
Financial assets are only derecognized from the consolidated balance sheet when the rights to the cash
flows they generate have extinguished expire or when their implicit risks and benefits have been
substantially transferred out to third parties. Similarly, financial liabilities are derecognized from the
consolidated balance sheet only if their obligations are extinguished or acquired (with a view to subsequent
cancellation or renewed placement).
When the risks and benefits of transferred assets are substantially transferred to third parties, the financial
asset transferred is derecognized from the balance sheet, and any right or obligation retained or created as a
result of the transfer is simultaneously recognized.
The Bank is considered to have transferred substantially all the risks and benefits if such risks and benefits
account for the majority of the risks and benefits involved in ownership of the transferred assets.
If substantially all the risks and benefits associated with the transferred financial asset are retained:
• The transferred financial asset is not derecognized and continues to be measured using the same
criteria as those used before the transfer in the balance sheet.
• A financial liability is recognized at the amount of compensation received, which is subsequently
measured at amortized cost and included under the heading “Customers deposits” in the balance
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